Prepay Section 202 Loan
Directors
of Multifamily Hub/Program Centers (Hub/PC) are authorized to approve proposals
from Owners of projects with Section 202 Direct Loans and Section 202 Direct
Loans with project-based Section 8 Rental Assistance (Section 202/8 projects)
for refinancing and prepayment of loans .
Authority for the prepayment of a Section 202 or
202/8 Direct Loan is provided by Section 811 of the American Homeownership and
Economic Opportunity (AHEO) Act of 2000 and 24 CFR 891.530.
Section 612(h) of the Departments of Labor, Health and Human Services,
and Education Appropriations Act, for the fiscal year ending September 30, 2002
amended the Multifamily Assisted Housing Reform and Affordability ( MAHRA)
statute to exempt Section 202 or 202/8 projects refinanced with FHA insurance
and processed under the requirements of HUD guidelines.
Pursuant to authority under Section 612(h) of the
Departments of Labor, Health and Human Services, and Education Appropriations
Act ending September 30, 2002, projects refinancing their Section 202/8 Direct
Loans with FHA insurance are exempt from MAHRA restructurings and market
comparability requirements if the prepayments and refinancings are processed
under the requirements of Section 811 of the AHEO Act and current HUD
guidelines.
Specifically, Section 811 permits a prepayment
and refinancing of a Section 202 or 202/8 Direct Loan if;
Original loan agreement or any rental assistance payments contract under Section 8, including rent supplement program, related to the project and;
the prepayment may involve refinancing of the loan if such refinancing results in a lower interest rate on the principal of the loan for the project and in reductions in the debt service related to such loan.
GENERAL INFORMATION/BACKGROUND
There is NO requirement that a refinancing plan for a Section 202 or 202/8 Direct Loan include FHA mortgage insurance. Direct Loans may be refinanced using any third party source, including financing by State or local housing finance agencies, use of tax-exempt bonds, multifamily mortgage insurance under the National Housing Act, reinsurance, or other credit enhancements, including risk sharing as provided under section 542 of the Housing and Community Development Act of 1992.
PREPAYMENT ACTIONS.
There are two types of prepayments:
Prepayments which do not require HUD’s approval. Section 202 projects approved during approximately 1977 to 1982 have a mortgage note that permits the prepayment with only a 30-day notice to HUD. Typically, the mortgage note, Form FHA-3432-EH (6/76) contains language similar to the following:
"Privilege is reserved to pay the debt in whole or an amount equal to one or more monthly payments on principal next due, on the first day of any month prior to maturity, upon at least thirty (30) days prior written notice to the Payee.” The Owner can pay off its 202 mortgage upon a 30-day written notice submitted to the Hub/PC and the residents.
Where an Owner may prepay a Direct Loan without HUD’s approval, but where the Owner elects to process the prepayment and refinancing under current HUD guidelines, HUD may permit the project to remain exempt from MAHRA requirements and, if approved in the prepayment/refinancing proposal, keep its current Section 8 rent levels, if the Owner/project agrees to prepay and refinance under the terms of the current guidelines and the project owner executes and records the Section 202 Use Agreement required under HUD
guidelines. The Hub Director may approve the prepayment proposal where HUD’s permission to prepay is not required, however, the Headquarters’ Office of Asset Management must provide the Hub Director written approval to prepay a Section 202 Direct Loan under the Headquarters’ “Prepayment Checklist” process. B. Prepayments which require HUD’s approval. Any prepayment action/request where the Direct Loan Note does not explicitly grant a right to prepay the loan, or the Owner elects to proceed under the current HUD guidelines rather than to exercise its right to prepay.
Where HUD approval is required to prepay a Direct Loan, a Use Agreement must be executed by the Owner and HUD and recorded upon HUD approval of the prepayment transaction.
Hub Directors are authorized to approve prepayment proposals that are processed under the requirements of HUD current guidelines and where the project will receive and record the Use Restrictions under the current guidelines. However, the Headquarters’ Office of Asset Management must provide the Hub Director written approval to prepay a Section 202 Direct Loan under the Headquarters’ “Prepayment Checklist” process.
I can assist you in preparing a request for prepayment of your Section 202 Direct loan.
Contact
me by phone (301-277-3465), fax (301-779-6716) or by email at alvinl.sutherlin@verizon.net
and I can discuss the status of your project.
My Resume
References provided upon request 
Date Updated:
04/22/2010 06:19:16 AM |
